S. Korea freezes interest rate at 0.75 pct on worries about COVID-19 resurgence

Source: Xinhua| 2021-10-12 11:51:19|Editor: huaxia

SEOUL, Oct. 12 (Xinhua) -- South Korea's central bank on Tuesday froze its benchmark interest rate at 0.75 percent on worries about the COVID-19 resurgence that slowed the economic recovery.

Bank of Korea (BOK) Governor Lee Ju-yeol and other monetary policy board members decided to leave the seven-day repurchase rate unchanged at 0.75 percent, after raising the rate from an all-time low of 0.50 percent in August.

It was in line with market expectations. According to a Korea Financial Investment Association (KFIA) survey of 100 fixed-income experts, 87 percent predicted the rate on hold.

The BOK started in August to tighten its accommodative monetary policy amid the mounting inflationary pressure and the signs of economic recovery, but it adjusted the tightening speed this month as recent economic indicators were negatively affected by the COVID-19 resurgence.

In the latest tally, the country reported 1,347 more cases of COVID-19 for the past 24 hours, lifting the total number of infections to 334,163. The daily caseload hovered above 1,000 for 98 straight days since July 7.

The country's industrial production shrank 0.2 percent in August from a month earlier, after skidding 0.6 percent in July. The industrial output grew 1.6 percent in June.

The services industry was hit hard by the COVID-19 resurgence as the government maintained its toughest social-distancing guideline in the Seoul metropolitan area since July 12.

Restaurants and cafes have been allowed to operate until 10:00 p.m. local time, while people refrained from outside activities such as travel, eating-out and shopping in offline stores.

Production in the services industry reduced 0.6 percent in August on a monthly basis, logging the first slide in three months. Output in the eatery and lodging and the wholesale and retail sectors declined 5.0 percent and 0.9 percent each.

Retail sale, which reflects private consumption, slumped 0.8 percent in August from a month ago, continuing to fall for the second straight month.

Some market watchers expected the BOK to hike its benchmark rate further as early as in November amid the rising inflationary pressure and the massive household debts.

The consumer price index (CPI) increased 2.5 percent in September from a year earlier, topping the BOK's mid-term inflation target of 2 percent for the sixth consecutive month.

During the July-September quarter, the CPI advanced 2.6 percent on a yearly basis, posting the fastest growth since the first quarter of 2012.

Estimate for household debts came in at 1,710.3 trillion won (1.43 trillion U.S. dollars) as of the end of July, up from 1,631.5 trillion won (1.36 trillion U.S. dollars) at the end of 2020 and 1,504.6 trillion won (1.26 trillion U.S. dollars) at the end of 2019.

Despite the BOK's rate hike in August, the policy rate remained at a record-low level, leading households to purchase new home with borrowed money.

Uncertainty over the COVID-19 resurgence was forecast to be eased amid the ongoing vaccination campaign.

South Korea administered 77.9 percent of the total population since the vaccination campaign was launched in late February, with 59.6 percent of the population being fully vaccinated.

Adding to the optimistic outlook, the country's export kept a double-digit increase for the seventh straight month to reach an all-time monthly high of 55.83 billion U.S. dollars in September. Enditem

KEY WORDS: South Korea,Policy Rate Freeze,ROUNDUP